|RIL chief Mukesh Ambani
New Delhi, Aug. 12: The telecom regulator today recommended that political parties, companies and religious bodies should be barred from entry into broadcasting and television channel distribution.
Trai said the restriction should be put in place to ensure plurality of viewpoints and restrain commercial interests from impeding the flow of unbiased news.
It added that the government should provide an “appropriate exit route” to such organisations that have already been granted permission to enter these areas.
The regulator pointed out that it had made these recommendations in November 2008 and then again in December 2012 when it was asked by the ministry of information and broadcasting to spell out guidelines for media ownership.
“Six years have elapsed without any concrete action being taken by the governmentÖ these recommendations Ömay be implemented forthwith,” Trai said in a 115-page report released today that defined critical issues such as control and suggested the need to restrict cross-media ownership. ( )
The regulator went a little further this time round when it said that even “surrogates” of these entities should be barred entry. However, the recommendations of the regulator are not binding on the government.
The report comes a few months after Reliance Industries took over the Network18 media group owned by Raghav Bahl, formally acquiring a clutch of television channels through a multi-layered arrangement it had crafted in January 2012.
The Reliance group first invested Rs 2,600 crore to pick up stakes in several regional channels operated by the Andhra Pradesh-based Eenadu group and then worked out an arrangement with Bahl under which the Network18 group gained control over the board of directors and the management of all the ETV channels.
In May, Bahl left Network18 after a final payoff from RIL, leaving the country’s largest conglomerate in complete control over several news and entertainment channels.
The Trai report noted that there were other corporate groups that have acquired media interests: the Aditya Birla group gained control over the TV Today network, and Anil Ambani’s ADAG has a substantial investment in UTV Bloomberg through Reliance Capital, the group’s financial services company.
“The media cannot be allowed to be captured by narrow interests of its titular ownership. It must be ensured that no particular interest is allowed to dominate media, both at the aggregate level and at the level of the individual media entity,” the report said.
The regulator said “the media cannot, and should not, be bracketed with general commodities and services. The market for ideas is very different from that for, say, shoes or biscuits. The media serves a higher purpose and needs separate consideration”.
Several political parties, such as the CPM, are said to be “supporting” news channels, especially in the south. The Trinamul government in Bengal offers financial assistance to at least one news channel.
Control & influence
The report said an entity could be considered to “control” a media company if it owned at least 20 per cent of the total share capital of the media outlet.
But it then went on to split hairs between de jure and de facto control. It said de jure control could be achieved in any of three ways:
Having not less than 50 per cent of the voting rights in the media company;
The ability to appoint more than 50 per cent of the members of the board of directors;
Control over the management or affairs through decision-making in the strategic affairs of the media company and appointment of key managerial personnel.
It defined de facto control as a string of agreements, contracts and/or understandings, overtly or covertly drafted, whether legally binding or not, that enable the entity to control the business decisions of the media company.
The definition of control is an iteration of the recommendations it made last month when it spelt out guidelines for the issue of new direct to home (DTH) licences.
In its latest report, Trai went a step further when it said loan conditionalities should also be considered as another instrument to achieve “control” over a media entity.
It said that if a company advanced a loan to a media entity that “constitutes not less than 51 per cent of the book value of the total assets of the media entity”, the latter will be deemed to be controlled by the company.
The telecom regulator culled this litmus test from the income tax act’s definition of “associate enterprises”.
This addresses the sort of arrangements that companies have lately tended to use to gain control of media entities.
Independent Media Trust (IMT), which is controlled by Reliance Industries, subscribed to zero coupon optionally convertible debentures (ZOCDs) of six companies promoted and owned by Bahl, who controlled Network18 with a 40 per cent shareholding.
Convertible debentures are recognised as a form of debt. RIL had the option to convert the debentures into equity with voting rights at any time within 10 years.
“Not only the provision for conversion of options into equity but the very act of acquisition of an option is concluded to confer de facto control on the acquirer,” the report said.
“On grounds of the inherent conflict of interest, the authority recommends that ownership restrictions on corporates entering the media should be seriously considered by the government and the regulator,” the report said.